Consultation Paper on proposal to expand list of jurisdictions for distribution activities

CONSULTATION PAPER ON THE PROPOSAL TO EXPAND LIST OF JURISDICTIONS FOR DISTRIBUTION ACTIVITIES Objective

1. The objective of this consultation paper is to seek comments and suggestions from the public and stakeholders on the proposal to expand list of jurisdictions for distribution of capital market products and /or services by distributors registered with IFSCA (“Registered Distributors”).

Introduction

2. The IFSCA (Capital Market Intermediaries) Regulations, 2025 (“CMI Regulations”) were notified in April 2025, replacing the IFSCA (Capital Market Intermediaries) Regulations, 2021. The CMI Regulations provide the regulatory framework for registration, regulation, supervision and enforcement of multiple categories of capital market intermediaries including Distributors. Regulation 32 of the CMI Regulations provides details about specific obligations and responsibilities for Registered Distributors.

3. Further, IFSCA has issued a circular titled “Master Circular for Distributors in the IFSC” on August 05, 2025 (“Master Circular”) consolidating various regulatory requirements applicable on Registered Distributors.

Background

4. Regulation 32(1) of the CMI Regulations inter alia provides that –

A registered distributor may undertake the following activities:

Page 1 of 8(a) Distribution of capital market products and/or services to any client in IFSC or

Foreign Jurisdiction: The capital market products and/or services offered by any regulated financial entity set up in India, IFSC, jurisdictions which are identified in the notification published in the Gazette of India vide no. G.S.R. 882(E) dated November 28, 2019, as may be revised from time to time, or any other jurisdiction as may be specified by the Authority, may be distributed to any client in IFSC or foreign jurisdictions;

(b) Distribution of capital market products and/or services to sophisticated investors in

IFSC or Foreign Jurisdictions: The capital market products and/or services offered by any issuer or service provider, respectively, which is set up in India, IFSC or any foreign jurisdiction may be distributed to sophisticated investors in IFSC or foreign jurisdictions;

(c) Distribution of capital market products and/or services to any client in India: The capital market products and/or services offered by any regulated financial entity set up in IFSC, jurisdictions which are identified in the notification published in the Gazette of India vide no. G.S.R. 882(E) dated November 28, 2019, as may be revised from time to time, or any other jurisdiction as may be specified by the Authority, may be distributed to any client in India;

(d) Distribution of capital market products and/or services to sophisticated investors in

India: The capital market products and/or services offered by any issuer or service provider, respectively, which is set up in IFSC or any foreign jurisdiction, may be distributed to sophisticated investors in India; and

(e) Any other activities as may be specified by the Authority.

5. The definition of “sophisticated investors” has been provided under regulation 3(1)(oo) of CMI Regulations as under: ”sophisticated investor” means and includes an accredited investor, or similar investor, by whatever name called, in its home jurisdiction.”

6. The Explanation provided under para 5.1 of the Master Circular provides as under - Page 2 of 8Explanation: For the purposes of regulation 32(1) of the CMI Regulations, the list of foreign jurisdictions which are identified in the notification published in the Gazette of India vide no. G.S.R. 882(E) dated November 28, 2019, as updated till the date of this

circular, is as under: a) United States of America; b) Japan; c) South Korea; d) United Kingdom excluding British Overseas Territories; e) France; f) Germany; and g) Canada.

7. The aforesaid regulatory requirements relating to distribution of capital market products / services to clients by a Registered Distributor w.r.t. permitted jurisdictions have been depicted in tabular form, as below:

Client Jurisdiction India IFSC Identified Foreign Other Foreign

(domestic) Jurisdictions Jurisdictions India Not Permitted Any client* Any client* Any client* Jurisdiction of (domestic) origin of products/ IFSC Any client* Any client* Any client* Any client* services being distributed Identified Any client* Any client* Any client* Any client* Foreign Jurisdictions Other Sophisticated Sophisticated Sophisticated Sophisticated Foreign investors only investors only investors only investors only Jurisdictions *Subject to applicable laws of jurisdiction of origin of capital market products/services;

and applicable laws of jurisdiction of clients

8. Accordingly, while a Registered Distributor is permitted to distribute capital market products / services offered by any regulated financial entity set up in IFSC, India and identified foreign jurisdictions to any category of client (including retail), the capital market products / services offered by a regulated financial entity from other foreign Page 3 of 8jurisdiction can be distributed to sophisticated investors (i.e. accredited investors) only.

Representations Received

9. IFSCA is in receipt of representations from market participants to expand the list of jurisdictions for distribution of capital market products and/or services to any category of clients. It has been represented by the market participants that Luxembourg and Ireland, being home to one of the largest funds industry in Europe and the world, are presently not included in the said list of identified foreign jurisdictions permitted for distribution to investors other than sophisticated investors. Further, it has been mentioned that while the UCITS funds1 which are set up in the United Kingdom, France and Germany are currently permitted, but similar UCITS funds set up in Luxembourg and Ireland are not permitted in this list.

10. It has been represented that allowing distribution of products domiciled in these jurisdictions will enhance the competitiveness of GIFT IFSC relative to other international financial centres and deepen the breadth of global investment opportunities accessible from India.

11. Similar representations have been received for addition of other jurisdictions (such as Cayman Islands and Cyprus) in this list.

Funds Statistics

12. IOSCO has recently in March 2026 published a report titled “2025 Investment Funds Statistics Report” (“IOSCO Report”) 2 providing a global overview of the size, composition, and risk characteristics of investment funds. As per the IOSCO Report, the top 10 jurisdictions with respect to open-ended funds for the year 2024 along with

aggregate NAV are as under:

S. No. Name of the Jurisdiction No. of funds Aggregate NAV (in Billions)

1. U. S. A. 12,487 35,757 1 Retail funds in European Economic Area under the Undertakings for Collective Investment in Transferable Securities Directive 2 https://www.iosco.org/library/pubdocs/pdf/IOSCOPD816.pdf Page 4 of 82. Luxembourg 12,983 5,169

3. China 11,283 4,044

4. Ireland 5,595 3,819

5. Canada 6,445 3,057

6. Germany 4,375 2,341

7. Switzerland 605 1,271

8. Japan 969 1,190

9. Brazil 12,801 1,128

10. U. K. 1,166 812

13. Further, as per the IOSCO Report, the top 10 jurisdictions with respect to closed-ended funds for the year 2024 along with Aggregate NAV are as under:

S. No. Name of the Jurisdiction No. of funds Aggregate NAV (in Billions)

1. Luxembourg 6,413 1,636

2. Japan 136 642

3. China 1,331 532

4. U. K. 2,523 492

5. U. S. A. 658 370

6. France 3,117 313

7. Jersey 298 251

8. Netherlands 607 189

9. Italy 1,383 149

10. Ireland 560 147

14. Therefore, there are several jurisdictions in the list of top jurisdictions globally in terms of open-ended funds / closed-ended funds that are currently not covered for distribution to investors other than sophisticated investor.

15. The role of Registered Distributors is mainly to act as a bridge connecting the issuers and service providers (mainly the funds) with the investors across the world. In this Page 5 of 8context, it may be noted that the distribution of capital market products/ services by

a Registered Distributor will also be subject to:

15.1. The applicable legal and regulatory framework of the jurisdiction of the issuer / service provider (mostly funds); and

15.2. The applicable legal and regulatory framework of the jurisdiction of the investor/ client in respect of such distribution.

16. In view of the above, it is felt that the list of jurisdictions may be expanded to encourage cross-border investments by retail investors through Registered Distributors in the IFSC in a regulated and transparent manner, in compliance with the applicable laws of the respective jurisdictions.

IFSCA’s Permitted List of Foreign Jurisdictions for the purpose of V-CIPs

17. The IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines 2022 were amended on October 31, 2025 to allow onboarding of Non-Resident Indians through Video Customer Identification process (V-CIP) if he/she resides in UAE; Singapore; Australia; and European Union excluding Croatia, in addition to the other seven jurisdictions mentioned above in para 6 above.

Proposal

18. In order to enhance opportunities for business of distribution of capital market products for entities in the IFSC, it is proposed that the list of permissible jurisdictions for the activity of distribution of capital market products to any category of clients may be expanded with the inclusion of following jurisdictions (in line with V-CIP framework):

a. UAE; b. Singapore; c. Australia; d. European Union excluding Croatia

19. Accordingly, the following clause is proposed to be inserted after clause 5.1 of the Master Circular for Distributors in IFSC dated August 5, 2025:

Page 6 of 85.1A The following additional jurisdictions are specified under clauses (a) and (c) of sub- Regulation (1) of Regulation 32 of the IFSCA (Capital Market Intermediaries) Regulations, 2025: a) UAE;

b) Singapore; c) Australia; d) European Union excluding Croatia.

Regulatory Objective and expected Impact

20. The proposed amendment aims to enhance opportunities for business of distribution of capital market products and services by Registered Distributors in the IFSC.

Public Comments

21. In view of the above, comments and suggestions from the public are invited on the proposed amendments to the Master Circular for Distributors in the IFSC under the IFSCA (Capital Market Intermediaries) Regulations, 2025.

22. The comments may be sent by email to Shri Hemant Verma, Manager at verma.hemant56@ifsca.gov.in and Shri Pawan Kumar Chowdhary, Deputy General Manager at pawan.kc@ifsca.gov.in with a copy to Shri Arjun Prasad, Chief General Manager at arjun.pd@ifsca.gov.in with subject line “Comments on the Consultation Paper on the proposal to expand list of jurisdictions for Distribution Activities” latest by August 07, 2026.

23. The comments should be provided in the following format:

Name and Designation Contact No. and Email address Name of Organisation S. No. Regulation Text of the Comments/ Detailed no./Sub Regulation/ Suggestions/ Rationale regulation no. Sub-regulation Page 7 of 8Suggested modifications **** Page 8 of 8